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Proprietorship Firm

Proprietorship Firm

Introduction 

In India, Proprietorship Firm is a single-person establishment or one-person company wherein an individual owns, manages, control, and execute his or her business in his way. In India, the form of doing business is very easy because it is not majorly governed by Law. It is not compulsory to register as a proprietorship firm but to gain tax benefits for people who registered their firm as a sole proprietorship. The profit and loss of an organization are shared by only one person who is the owner of the company or business.

Who is a sole proprietor?    

A sole proprietor means the sole owner of the proprietorship business or company or firm. Hence, a business will be carried forward by making a new bank account for the business, and registration of GST will be done by using a PAN card and Aadhar card of the proprietor or owner of the business. The proprietor is completely responsible for all the profits and losses of the business.

Benefits of Proprietorship Firms

Proprietorship firms have several benefits for their owners but some of these benefits are discussed below:

1.    Smooth Start

There is no detailed registration process for the establishment of proprietorship firms. A proprietorship firm uses the owner’s legal identity and until it is necessary then there is no requirement for registering their firm separately. This is very beneficial for the proprietor because the smooth registration process makes it easier to register their firm or business.

2.    Flexible Operational Strategies

Being the sole owner of a business, it is easier to understand and operate the same. The owner is the only decision-maker. One-owner businesses’ operational functioning have more straightforward because there is the only person to create and implement plans for the business.

3.    Undivided Profits

In proprietorship firms, since there is only the sole owner of the company then there are no firm rules for the money earned by the business. The owner or proprietor is the only person who accumulates their profits and further invests them in the market and other ventures. Sole ownership gets rid of the benefit-related disputes in the firm. Money comes in to facilitate and preserve the processes in the firm.

4.    Taxation

If the profits of the company are less than Rs. 2.5Lakh per year than any sole proprietor is not entitled to pay income tax. This is an important benefit for the firm to start small and save taxes. However, it is required that the firm has to pay income taxes once when the profits exceed Rs. 2.5Lakh per year.

Documents Required for Sole Proprietorship Registration 

For all the types of registrations which are recommended for sole proprietorship firms, the general documents required for most of them are given following but some exceptions for specific types of registrations. The owners are advised to check the official website or portal of the government body that issuing the registration to make sure to have all the documents required for the same.

For registration of a sole Proprietorship, the following documents are compulsory:

  • Aadhar Card: Aadhar card number that is required for official registration. 

  • PAN card: It is needed at the time to file Income Tax Returns of proprietorship registration. Thus, it is also compulsory to get a GST registration number.

  • Bank account number: The bank account number that is linked with office transactions essential to be submitted. If he/she does not have a separate bank account for business then he can submit his account number.

  • Registered office proof: Certified office proof is required for any registration which is mentioned above. Registered office proof is mentioned above in detail.

Process for filing the registration of a Sole Proprietorship 

1.    Documentation

The process of proprietorship registration starts with the documentation of the proprietor. A list of the documents which is required for registration of a sole proprietorship has been mentioned below. You shall have to ensure that all the documents are authentic and updated.

2.    Select a Unique Name

The first step for registration of proprietorship is to select an unrepeated name for it. The name must be valid and must not infringe the Intellectual Property rights of any registered trademark. After selecting the name of your business then also make sure that you register it as a trademark to prevent it from being misused in the future.

3.    MSME or Udyam Registration  or Udyog Aadhar

For opening a bank account for business and also you require two compulsory documents in the name of your proprietorship. Firstly, the Udyog Aadhar card and second the MSME or Udyam Registration Certificate. These documents allow an entrepreneur to seek online MSME services and benefits offered by many Government Departments under MSME Act.

4.    GST Registration

If your proprietorship firm obtains GST Registration then you can supply goods and services throughout India. If your business activities are restricted only within one state then GST registration shall not be needed until the turnover crosses Rs.40Lakh in case of a supply of goods, and Rs.20Lakh in case of a supply of services.

5.    Other Tax Registrations

Based on the nature of the business activity, a proprietorship firm may be needed to get TAN, IEC, and PT Registrations. TAN is essential to comply with TDS laws while the IEC Code is needed for businesses involved in the import and export of products or services. Proprietorships are needed to get PT registrations in certain states where the Professional Tax is compulsorily imposed on professionals.

Conclusion 

It concluded that Proprietorship Firm is a single-person establishment or one-person company wherein an individual owns, manages, control, and execute his or her business in his way. It is not compulsory to register as a proprietorship firm but to gain tax benefits for people who registered their firm as a sole proprietorship. The profit and loss of an organization are shared by only one person who is the owner of the company or business. If the profits of the company are less than Rs. 2.5Lakh per year than any sole proprietor is not entitled to pay income tax.

eStartIndia will help you with Proprietorship Firm Registration from the comfort of your home.

Author:

Radhika Punani
Ambala
I am Radhika from Ambala city. I qualified LLM from Kurukshetra University and B.A.LLB from Maharishi Markandeshwar University


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